Getting the first car is a huge step ahead for every Singapore citizen. When you start the car, drive through the streets, or park outside your workplace, it is like shouting “Hey, I made it.” Since buying a car can be an expensive affair, one of the top financing methods is using an auto loan.
Once a car loan is approved, calculating the payments can be challenging because of the many factors that come into play. For example, you need to factor in the interest rates, additional charges, and any other fee that might be included. A simpler and faster way to calculate the payments is using a car loan calculator in Singapore.
In this post, we will take a closer look at car loans in Singapore and further demonstrate how to use an auto loan calculator to determine the payments
Car Loan Calculator in Singapore: How Does It Work?
Before we can look at the car loan calculator Singapore, it is important to start by answering the question, “What is a car loan?” This is a type of financing offered by loan providers to help borrowers purchase cars. Once the auto loan in Singapore is approved, you are required to repay it in instalments within the loan term.
Unlike other types of loans, such as personal loans and renovation loans, the car you are buying serves as collateral in the case of a car loan in Singapore. Therefore, the bank can seize the vehicle if you are unable to repay the money.
How Does a Car Loan Calculator in Singapore Work?
A car loan calculator in Singapore is used by borrowers to determine the amount of money they are required to pay. You will find this very important because it makes it easy to determine the best loan offer and also plan for the payments during the loan tenure.
What You Need to Use a Car Loan Calculator Singapore
Although it is possible to manually calculate the amount to repay after taking a car loan in Singapore, using a calculator is simpler and helps you avoid errors. You simply key in the following components to get the monthly payment:
The Cost of the Car
This is the value of the car that you are buying. Think of this as the principal if you were borrowing a personal loan in Singapore. However, you need to subtract the amount that you raised as a down payment. This means that your monthly payment will be low if you paid some down payment.
The Loan Term
This is the length of the term that you commit to paying the auto loan in Singapore. If you select a longer loan term, your monthly payment will be low, but the total amount payable will be high. However, borrowers with shorter loan terms will get higher monthly payments, but the amount payable will be low.
The best method is selecting the loan payment schedule that will not cause a lot of interruptions in your life. However, we must say that the faster you can clear the loan the better because the amount payable will be lower compared to when you would have taken a longer period.
The Interest Rate of the Loan
Interest is the cost of the loan. In Singapore, the loan interest is determined based on your creditworthiness. If you have a poor credit score, the interest will be high. Therefore, it is advisable to work on improving your credit score before making the application.
The Results of a Car Loan Calculator
After keying in the above details, the calculator will make all the calculations and instantly give the following details:
Total Interest Paid
This is the entire cost of the loan by the time you clear it. However, this is not the full picture of the car loan you get. To get the actual picture, call it the total amount payable, you need to add the loan interest to the principal.
Total Monthly Payment
This is the entire amount that you need to pay every month towards clearing the loan. Part of this money is used to clear the loan principal while the other meets the interest of the car loan in Singapore.
The Principal Paid
This is the amount that you borrowed (value of the car) less down payment. Note that this value is calculated based on the value of the car at the time of purchase.
It is advisable to use the car loan calculator Singapore once you get offers from banks and before signing the loan agreement. Once you have agreed to the details, the rest will be committing to the terms and conditions.
How Does a Car Loan Calculator Get the Interest of the Loan?
When you key in all the required details in a car loan calculator, one of the results is the total interest over the life of the loan. If you are using a calculator that provides an amortised schedule, you will be able to get the amount of interest to be paid every month. See the formula used in auto calculators:
Although some banks in Singapore might have different terms and conditions, many are those that use the then-current balance. This implies that when starting to repay the loan, the interest will be more because the actual balance is pretty high. However, the interest will keep going down as you repay the principal every month.
The reducing interest rate only holds when you pay the loan according to the schedule. If you default, the amount payable every month is likely to increase because of penalties.
Important Things to Do Before Applying for a Car Loan
Now that you know how a car loan calculator in Singapore works, it is important to do the following;
Decide that You Actually Need Auto Financing
When taking a loan, it is important to appreciate that it is a commitment that will impact your life. Therefore, you need to answer the question, “Do you need to take the loan?” It is advisable to only go for car financing only when the vehicle will have a positive impact on your life. Here are some good reasons for buying a car:
To make traveling to and from work easy.
As a method of growing your asset.
To make traveling around for personal reasons easy.
Moving products from one point to another.
To fit in your social-economic class.
Check Your Credit Score and Ensure it is Right
Although banks can seize your car if you are unable to repay an auto loan, they largely use your credit score to determine the interest rate. Therefore, it is advisable to check and ensure the credit score is reflecting the right status of your creditworthiness. To do this, you should get your credit score report and establish if it contains errors. If you find any, get them corrected before making for the loan.
If the credit score is very low, you might want to work on it before applying for a car loan. If you apply for a car loan when the score is poor but it improves a few months down the line, do not hesitate to ask for a car loan refinancing. However, this is only possible if the bank you select allows refinancing.
Review Your Payment Ability
In addition to ensuring you have a good credit score, it is crucial to think about your ability to repay the loan. This requires you to rethink your budget because the car loan is adding a new payment on top of others, such as rent and utility bills. The rule of the thumb is to only go for a loan when you can pay without causing serious strain in your life.
When dealing with budgeting, factoring in the car loan payment is not enough. Your new car will come with additional costs that have to be catered for in your budget too. For example, you will need gas to drive around, parking fees when visiting the city, insurance and regular maintenance costs.
Car Loan Calculator in Singapore: Apply for a Car Loan through Lendela
To use a car loan Singapore calculator, you need to have the different loan offers on the table. Therefore, start by applying for the auto loan and the best method is using Lendela. This is a loan comparison site designed to make the application and securing a loan easy, fast, and convenient. So, here is how it works.
You visit Lendela to apply for a car loan in Singapore. They have a simplified process and it is likely to only take a couple of minutes to apply.
Lendela will get you offers from multiple banks and financial institutions, and book an appointment for you. This is your opportunity to use the car loan Singapore calculator when comparing offers. If you have any queries, make sure to ask and get clarifications at this point.
Sign the loan agreement, pick the keys of your car, and drive off. Remember to start paying the loan in line with the agreement you have signed.
If you are buying a car using an auto loan, it is important to only go for the best deal (Why cars are so expensive in Singapore?). By working with Lendela, you are sure of identifying the best banks and loan deals fast. See – it is easy, fast, and reliable!